Mexico is a country located on the southern portion of North America between the United States and Central America. It is bathed by both the Pacific and Atlantic Ocean and has over 7600 of square miles of area (13th largest country in the world). Discovered by the Spanish, Mexico area was historically occupied by many intertwined civilisations such as the mayans, aztecs, olmecs and more.
Mexico has a Gross Domestic Product (GDP) of 1,273 trillion USD (15th in the world) and aHuman Development Index (HDI) of 0,779 (86th in the world and 9th in Latin America). Mexico also has a literacy rate of roughly 95.2%, and 21% of students that enter primary school are expected to graduate from college, also 10% of the population is considered English speakers. The greater part of this 10% are located near the border with the United States.
For economics, Mexico is forecasted to benefit a lot from the nearshoring opportunities that are appealing for companies in the US, China and other asian countries. After the Covid-19 world crisis and the Russia-Ukraine war, organisations are tempted to invest in Latin America, especially Mexico. Transferring operations for countries that are closer to their territory, are unlikely to get involved in wars, have lower labour costs and the benefits of free trade agreements are all great reasons for these types of moves.
Mexican Peso (MXN)
Standard VAT of 16% / 8% reduced at Southern and Northern borders / 0% exports, medicine, milk, wheat, meat and corn and a few agriculture services
Payroll and taxes
Employer contributions in Mexico
The contributions that employers are obliged to make are the following:
26.54% to 33.58% to Social Security (IMSS) - Annual contribution is up to 166,174 MXN
5.15% for Retirement
5% for National Housing Fund
In total, it ranges from 36.69% to 43.72% of employment cost for each employee. It is ranked as one of the countries with the highest employer taxes in the world.
There are a few full-time employee contributions that workers are obliged to pay in Mexico. The list is the following:
1.65% - Social Security (IMSS) - Annual contribution is up to 23,804 MXN
1.125% - Retirement Insurance
In total, it’s equal to 2.775% of employees' salary, one of the lowest rates in the world.
Personal income tax
When it comes to personal income tax, the rates grow according to how much someone makes every month. Check out the table below for the full list of rates:
Minimum Wage in Mexico
The current minimum wage in Mexico is 207.44 MXN as a daily minimum wage, which corresponds to 326.4 USD monthly. Minimum wage has a higher value in the Northern Border Zone, a region of Mexican states that border the United States. In this area, the rate is 312.41 MXN daily, equal to 505.7 USD.
Working Hours in Mexico
In Mexico, the typical working schedule consists of eight hours per day and 48 hours per week. However, Mexico's employment laws recognises three work shifts: day shifts, night shifts, and mixed shifts. Day shifts last 48 hours per week and fall between 6 am and 8 pm. Night shifts last 42 hours per week and take place between 8 pm and 6 am. Mixed shifts run for 45 hours per week.
It's worth noting that the maximum weekly and daily working hours may vary based on the terms specified in the employment contract or collective bargaining agreements.
Overtime in Mexico
Any work performed beyond the standard prescribed shift is classified as overtime and is subject to regulation by the employment contract or collective agreements.
Payment for overtime is based on two criteria that determine the rate of compensation, which can be double or triple the standard wage. These criteria are the total number of overtime hours worked during the workweek and the number of hours worked in a single day after a regular shift.
For instance, the first nine hours of overtime worked in a week must be paid at a rate of 200% of the standard salary rate, and every hour worked after that is to be paid at 300% of the standard salary rate. In addition, the first three hours worked after a regular shift are considered double hours, and every subsequent hour worked is classified as triple, regardless of the total number of overtime hours worked during the week.
Employee Benefits in Mexico
In Mexico, employers are required to make a 13th-month salary payment, also known as Aguinaldo, which is a bonus paid out by December 20th each year. The Aguinaldo amount is calculated based on 15 working days of salary and an additional allowance, which is based on a 365-day year.
Types of leave available in Mexico
Mexican labour laws specify a minimum of 12 days of paid leave per year. Additionally, employees are entitled to an extra two days of paid leave for every year of service, starting from the completion of the first year of service. Once an employee completes five years of service, two extra days of paid leave are added for every subsequent five years of service. There are no vacation bonus.
Qualified employees in Mexico are eligible for up to 52 weeks of paid sick leave at 60% of their regular salary when verified by medical authorities affiliated with IMSS (Mexican Social Security System). In the case of a work-related injury, the employee is entitled to receive 100% of their regular salary.
Maternity leave is defined on a 90 day leave. The only difference is that 30 of the 90 days have to be taken immediately prior to the baby’s birth. This leave is fully paid by the Social Security system.
New fathers have five days to take after the birth of each child. This period is paid in full by the IMSS.
Public Holidays in Mexico
In Mexico, there are 3 different types of national holidays. The Statutory, Civic and Festivities. The Statutory holidays are observed nationwide and eligible employees are entitled to days off. The others are observed as well, but employees are not entitled to take the days.
New Year's Day - 1 January
Constitution Day - 5 February
Benito Juarez birthday - 21 March
Labour Day - 1 May
Independence Day - 16 September
Revolution Day - 20 November
Christmas Day - 25 December
Attracting talent in Mexico
The competition to attract top talent is a global phenomenon, yet its outcome varies across different regions and nations. Working for an organisation that is aligned with what you believe and your practises are valued a lot in Mexico. Check out a few points that could make the case for attracting the best talent in Mexico.
Reinforcing company culture
In today's job market, many companies offer similar compensation and benefits packages., therefore reinforcing company culture can help to differentiate a company from competitors and create a more compelling employer brand.
Recruitment marketing is the process of using marketing tactics to attract, engage, and nurture potential job candidates. It involves creating and implementing targeted strategies to build awareness of job opportunities, promote the employer brand, and attract top talent.
This strategy is becoming increasingly important in today's job market, as competition for top talent intensifies and candidates have more options than ever before. By leveraging marketing techniques such as social media advertising, email campaigns, and content marketing, recruiters can create a more compelling and personalised candidate experience while delivering the best results for their businesses.
This area has been receiving a lot of investment from companies. The 2022 Rally Recruitment Marketing Job & Salary Survey showed that recruitment marketing managers expect their area's budget to increase up to 35% by next year and 28% of them are consideringspending more money on recruitment marketing tech (such as softwares, apps and other digital tools).
After the impact of Covid-19 and the uncertainty of this period, the Mexican workforce have started worrying more about stability. A Universum survey conducted in Mexico in 2020 revealed that secure employment was the second most important factor on a job opportunity, just behind professional training and development and ahead of future monetary earnings and advantages.
This trend shows that programs that enhance job security and measures intended to mitigate the risk of layoffs are appreciated by the workforce and can play a major role in attracting the talent companies need. If people feel more \ secure at their positions -especially in difficult times-, they are more likely toto want to stay with the company, not only will they be able to focus more at their jobs without the fear of job uncertainty looming over their heads, they are also more likely to want to stay on with a company that makes them feel safe.
Termination of employment in Mexico
Employers cannot terminate employment relationships without just cause in Mexico. The Mexican Federal Labor Law provides a closed list of reasons and procedures for terminating an employee without incurring liability. The list of reasons includes the following:
Lying about work qualifications
Breach of obedience or honesty principles
Drinking alcohol at the workplace
Disclosing company secrets
Refusing to comply with safety procedures
Missing 4 days of work without reason in a 30-day period.
In Mexico, there are no employee rights on legally mandated minimum notice periods. However, the Federal Labour Law stipulates that if circumstances require it, the company must provide written notice to the employee within 30 days of becoming aware of the misconduct. This notice must explain the reasons for the dismissal, or the Labor Board must issue a termination notice.
In Mexico, the probationary period is 90 days. After that, the employee is entitled to all perks and benefits of the position.
If an employee is terminated in Mexico without reasonable cause, the employer is required to provide severance pay. The severance payment must equal three times the employee's regular monthly salary, and for employees with more than 15 years of service, an additional 20 days' pay for every year of service beyond the 15 years should be added to the final amount.
What are my options for hiring in Mexico?
If you are planning to expand your business into Mexico, Airswift can help you navigate the local requirements. We provide assistance with hiring, legal counsel, labour laws, taxation compliance, work environment, permits, and more. By leveraging our expertise, our clients are able to manage their risks effectively, and focus on the growth and expansion of their businesses. We offer budget-friendly solutions and quick results. To learn more about how we can assist your organisation with HR, please visit our website.
We are dedicated to finding the ideal employees in Mexico who align with your corporate culture. You can trust us to identify and recruit top talent that can make a lasting impact on your organisation.
This allows you to focus on running your business without the hassle of managing administrative tasks such as salary payment, payroll management, and employee benefits. By partnering with a third-party EOR, you can bypass the need for a physical office while we handle all administrative duties.
*Although the information provided has been produced from sources believed to be reliable, no warranty, express or implied, is made regarding the accuracy, adequacy, completeness, legality or reliability of any information. For the latest information and specific queries regarding particular cases, please contact our team.
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